ECONOMICS – Page 4 – REVIEWS AND VIEWS OF LIFE

FINANCIAL LITERACY

What Professor Fullenkamp makes clear is information is key to understanding financial markets, but human judgement is the difference between investor’ success or failure.

Books of Interest
Website: chetyarbrough.blog

Financial Literacy (Finding Your Way in the Financial Markets)

By: The Great Courses

Lectures By: Professor Connel Fullenkamp

Professor Connel Fullenkamp (Lecturer at Duke University, economist and director of undergraduate studies in economics.)

“Financial Literacy” may put some listeners to sleep but there is a lot to be learned from Connel Fullenkamp’s lectures. He gives a lengthy description of financial markets extending from Stocks to Bonds, Forex, Commodity, and Derivative Markets. He offers information about how money is used and made in financial markets. Fullenkamp addresses banks, stocks, selling and buying securities, expected returns on investments, how they are priced, controlled, and how information about them is important for personal financial decisions.

It is no surprise to find that banks play a critical role in financial markets.

They provide personal banking services by accepting deposits and providing loans to individuals and businesses. They smooth the flow of money in the economy. Banks can help companies raise capital by offering advice and services for the issuance of stocks and bonds to finance businesses. They offer advisory services for mergers, acquisitions, and other financial strategies. Banks can act as market makers by buying and selling securities for their clients. They can provide asset management services, research and analysis, and ensure legal regulation and compliance with government and international laws. Banks are the backbone of financial markets when they provide efficient allocation of resources and ensure the smooth functioning of the financial system. All of this is true in concept.

However, banks, savings and loan companies, and mortgage lenders are run by human beings who are subject to all the risks of human nature that can lead to catastrophic financial collapse as it almost did in the 2007-2010 mortgage derivative crises.

To be fair to the professor’s presentation, the 2007-2010 crises is not only because of the bad mortgages generated by financial institutions like Countrywide, New Century and Ameriquest. Goldman Sachs, Lehman Brothers, Bear Stearns, and Merrill Lynch investment banks are equally guilty. They packaged bad mortgages with high-risk mortgages to be sold to the public as safe collateralized securities that were far from safe and ultimately unsound. The result was a near worldwide financial collapse.

The government compounded the failure of 2007-2010 by guaranteeing poorly justified mortgages that were included in the packaged securities.

Rating agencies like Moody’s Standard & Poor’s, and Fitch ratings misled investors about the risks of the packaged mortgage securities. Government oversight organizations like the Federal Reserve and Department of the Treasury did not adequately do their job. Ironically, banks like Wells Fargo resisted the mortgage derivatives while banks like JPMorgan Chase bought and sold them but was too big to fail. Ironically, both banks became vehicles for recovery by taking over some of the lenders that had to0 many mortgage derivatives in their portfolios. (As noted in earlier book reviews, many families lost their homes because of foreclosures caused by lenders who originated the mortgages in these securities.) Fullenkamp explains financial markets are based on information. However, as noted by information computer geeks, “garbage in, garbage out” sunk lenders and victimized many investors, lenders, and homebuyers.

In explaining the stock market, Fullenkamp notes an investor becomes a partial owner of a company which gives them a stake in a company’s future profits, either from dividends or market performance.

Stocks have a dual identity. The difficulty for the investor is in understanding the information provided by the company to predict company performance and reap the benefits of stock appreciation. Fullenkamp gives some insight on assessment of that information, but most listeners seem most likely to pay less attention to professors of finance than to their own judgement.

Fullenkamp goes on to discuss Forex (Foreign Exchange). This is a global marketplace for trading national currencies.

Unlike stock and bond markets, a Forex market operates 24 hours a day because currency is an international trading market with centers in different cities like New York, Tokyo, and London. In the case of Europe and the U.S., the trade would be in Euros and US Dollars or in Japan and the U.S., the trade would be in Dollars and Yen. Exchange Rates fluctuated based on nation-state events. Strategic buying and selling based on those events can create profits and losses for exchange traders. Unlike a singular centralized stock market, Forex is decentralized and conducted electronically over the counter (OTC) by a network of banks, brokers, and dealers.

Fullenkamp also defines commodities markets. There are hard and soft commodities. Hard are like gold, oil, and other naturally produced materials. Soft are agricultural products like wheat, coffee, or cotton.

Most commonly, trading in these products is done with futures contracts. Futures are agreements to buy or sell a commodity at a predetermined price on a future date. The investor is gambling on the commodity to be either worth more or less than what the product is expected to cost at the actual time of purchase or sale. There are several exchanges around the world. The participants are speculators that either take the commodities at the agreed upon price or simply gain or lose money based on the actual price of the commodity when it is deliverable.

There is a great deal to absorb from Fullenkamp’s lectures. The last lecture is on “The Future of Finance”.

He suggests the technology of mobile phones has expanded the lending industry to individuals from institutions. It has already begun in less successful economic societies. Mobile money platforms and digital financial services are being used in Africa. Users of these platforms store, send and receive money by mobile phone owners because traditional banking services are not available. Fintech companies are formed to assess creditworthiness of individuals and small businesses. The vast amount of personal information becoming available with the internet becomes a source of customer approval or rejection of small companies and individuals seeking loans.

What Professor Fullenkamp makes clear is information is key to understanding financial markets, but human judgement is the difference between investor’ success or failure.

WORKER ABANDONMENT

Trump is unlikely to help the middleclass and poor any more than some of America’s past Presidents, but he disrupts the status quo. That is Thomas Frank’s answer to why Trump was re-elected.

Books of Interest
Website: chetyarbrough.blog

Listen Liberal (Or, What Ever Happened to the Party of the People?)

By: Thomas Frank

Narrated By: Thomas Frank

Thomas Carr Frank (Author, political analyst, historian, and journalist)

How could the American people elect a billionaire felon as President of the United States? Thomas Frank offers a compelling answer to that troubling question.

Since WWII, the American people have been misled by the words, policies, and deeds of both Democratic and Republican leaders. No post WWII leader escapes Frank’s frank explanation. Not since Franklin Roosevelt, and Harry Truman have any Presidents effectively reduced income inequality.

Frank embarrasses American voters for complicity in reducing the size of the middle class, ignoring the poor, and making the rich richer. He explains how Presidents of the last 70 years have made the middleclass smaller and the poor poorer. Frank particularly points to Bill Clinton and Barack Obama as examples of Ivy League’ wordsmiths that misled the public and instituted policies that moved America away from the working class and poor.

Clinton and Obama represented education as the primary measure of success in the 21st century. They largely ignored the working class that grew the American economy to be the most successful in the world. With that neglect the Democratic party became adjunct to the Republican party by diminishing the contribution and value of working Americans. Whichever party leads America no longer makes a difference to the middleclass’ and poor. Frank argues there is little difference between a Democratic or Republican President. The middleclass and poor realize those who are elected to lead make little difference in American worker’s lives.

Frank methodically dismantles Clinton and Obama administration’s policies to show how they diminished opportunity for the middleclass and poor. Clinton manages to balance the national governments debt on the backs of working America. Clinton’s welfare reform took many off of welfare by demanding employment as a requirement for any help by the welfare administration. That seems laudable but its impact on single parent households left children home alone and at the mercy of their neighborhoods. A child alone is left to the influence of neighborhoods festooned with gangs, drugs, guns and their societal consequences. In reducing the number of people on welfare, poverty increased.

Clinton’s programs for crime control massively increased prison building and prison populations that disproportionately affected African and Latino American communities.

Clinton repeals the Glass-Stegall Act and allows commercial banks to enter the derivative mortgage business that led to the near future financial collapse of America between 2007 and 2010.

Entry into the North American Free Trade Agreement (NAFTA) led to manufacturing job losses in America.

Frank admits Obama helped the middleclass and poor with Obama Care but argues he made the same mistakes as Clinton by supporting the rich at the expense of the middleclass and poor. Obama chose to follow the lead of George Bush’s plan to get America out of the economic ditch of the century by bailing out the financial industry while allowing the working class to fend for themselves. Many lost their homes as a result of banker’s lending greed and mortgage derivatives that came from Clinton’s decision to repeal Glass-Stegall. None of the banks were punished by bankruptcy because the federal government made a deal to keep them in business or subject to acquisition by bigger banks that became even larger. Poverty remained at the same level. Surprisingly homelessness was reduced by Obama’s “Opening Doors” initiative in 2010. However, the trend of aiding the rich at the expense of the working class is re-invigorated by emphasis on higher education and creativity rather than the nuts and bolts of economic prosperity that comes from job creation and a working public.

The trend of aiding the rich at the expense of the working class is re-invigorated by emphasis on higher education and creativity rather than the nuts and bolts of economic prosperity that comes from job creation.

The glaring irony of Frank’s observation led to the election of a billionaire who lauds wealth and power and cares little about the middleclass and poor. Donald Trump, Barack Obama, and Bill Clinton distorted the truth, partly by lying to themselves but also by purposely lying to the public with political policies and actions that did not make the lives of the middleclass and poor any better.

Trump directly distorts the truth but Obama and Clinton lie to themselves about the value of education as the singular path to improvement for the middleclass and poor. People are not only educated by school.

People are also educated by work and their experiences in life. Not every person in America or the world is interested in having a college degree. Shared economic productivity is the key to reducing income disparity. The brilliant oratorical skills of Obama and Clinton were refined by their intelligence and education but not everyone is blessed with the same skill. Trump is no Obama or Clinton, but he appeals to many who feel they have been left behind or can be benefited by his transactional view of the world.

One may agree that economic productivity comes from creativity, education, and work. However, it does not come from emphasis on one thing but on equality of opportunity for all to be employed.

Franks’ cynicism is overwhelming. By the end of his book, which is published before Hilliary Clinton’s political defeat by Trump, one is depressed by the truth of what he writes. The second election of Trump is proof of the failure of the Democratic party, and the Republican party, to live up to a belief in social equality and equal opportunity.

Creativity is an innate human quality. Education comes in many forms which are both formal and informal.

Being employed is a government, private enterprise, and personal responsibility. It is the job of governance to create public policies that support equality of opportunity for people to be creative, educated, and employed. Equality of opportunity ensures national economic growth and prosperity.

Trump is unlikely to help the middleclass and poor any more than some of America’s past Presidents, but he disrupts the status quo. That is Thomas Frank’s answer to why Trump was re-elected.

BEST & WORST OF US

Trump’s mass deportation idea is draconian and inhumane. A system of deportation should be organized to repatriate some undocumented immigrants but not to expel them without fair consideration of their circumstances and the needs of the American economy.

Books of Interest
Website: chetyarbrough.blog

Real Americans

By: Rachel Khong

Narrated By: Louisa Zhu, Eric Yang, Eunice Wong

Rachel Khong (Author, American editor in San Francisco. Born in Malaysia to a Malaysian Chinese family.)

In a 1931 book, “Epic of America”, James Adams described America as a land where life should be better and richer for everyone, with opportunities for each according to their ability or achievement. This was written in the depths of the depression that began with the stock market crash of 1929. Of course, illegal immigration was nearly impossible in the 1930s, but still–there were 500,000 American immigrant arrivals in the U.S. during that decade. That amounted to 11.6 percent of the U.S. population at that time. Rachel Khong’s vision in “Real Americans” tests the next four years of Trump’s administration.

Khong writes a fictional story of a romantic relationship between an undocumented young Puerto Rican woman who is about to be deported and an equally young South Korean American who is falling in love with her.

Both are well educated by the American education system. The boy is interviewing for entrance to Yale while the girl is meeting an immigration lawyer to see what can be done to avoid deportation. The girl lives with a feckless “Wanna-Be actor” father and driven mother who is struggling to make a living in America. The daughter is shown to be quite intelligent with the ambition to become a data analyst.

Mass deportation without fair consideration of immigrant circumstance and their societal contribution is inhumane and foolish.

The developing affection between these two characters is beautifully created by the author. They are an example of why resident status needs to be treated fairly when immigrants are found to violate the immigration laws of the United States.

The idea that immigrants take jobs away from native American workers is a false flag.

The agricultural industry will be seriously impacted by mass deportation of undocumented labor.

The need for workers in America will continue to grow in the foreseeable future of the largest economy in the world. The demographics of an aging American population (that is not replacing itself) requires immigrants to grow and maintain the economy. The two characters of Khong’s story may not be every immigrant but they show how some are the future of American prosperity. Mass deportation of illegal immigrants will harm the American economy.

Immigrants have played a critical role in what America has become.

Khong is just telling a fictional story about American immigration, but it clearly illustrates how political rhetoric devolved into political lies and misinformation about the value of all human beings. America does have a history of Indian and Black murder and enslavement, but it also has a history that ameliorates discrimination and past misdeeds. One hopes the blunt force of immigrant deportation is not a policy that repeats America’s societal mistakes. American needs a carefully adjudicated immigration policy for the betterment of society.

Today, the total percentage, including 11,000,000 undocumented immigrants, is estimated at 14.3%. In the 1930s, 11.6% of the American population was immigrant. The question is whether the undocumented should be deported, regardless of the contribution they make to American productivity.

An aging population in America is not being replaced by native born Americans. Worker loss of undocumented immigrants may be harmful to American productivity.

Trump and his deportation Czar, Tom Homan.

Khong’s story is entertaining fiction, but Trump’s deportation plan is a threatening work in progress.

FOUR MORE YEARS

Andrew Leigh’s brief history of economics reminds listeners of a threat America faces in the next four years.

Books of Interest
Website: chetyarbrough.blog

How Economics Explains the World (A Short History of Humanity)

By: Andrew Leigh

Narrated By: Stephen Graybill

Andrew Leigh (Author, Australian politician, lawyer, former professor of economics at the Australian National University, currently serving as Assistant Minister for Competition, Charities and Treasury and Assistant Minister for Employment in Australia.)

Andrew Leigh offers a bird’s eye view of the history of economics. He provocatively explains why the European continent, rather than Africa (the birthplace of the human race) came to dominate the world. He suggests it is because of economics and the dynamics of the agricultural revolution.

Because Africa offered a more conducive environment for natural food production, Leigh infers natives could live off the fruits and nuts of nature. He infers farming and agricultural innovations (like the plow) were of little interest to Africans.

One may be skeptical of that reasoning and suggest the primary cause is sparse arable land for early African inhabitants. Without arable land, there was little advantage from the agricultural revolution.

Nevertheless, Leigh’s history is a wonderful reminder of great economic theories that improved the lives of an estimated 8.2 billion people on this planet. He touches on the lives of Adam Smith, David Ricardo, John Maynard Keynes, and Milton Friedman. Each made great contributions to the history of western economics.

Adam Smith is considered the father of modern economics. (1723-1790)

Leigh notes Smith was a deep thinker who sometimes neglected the world he lived in by forgetting to properly dress himself or falling into a hole while thinking about economic theories. Some of his key theories were “Division of Labor”, the “Invisible Hand”, “Labour Theory of Value”, “Free Markets and Competition”, and “Capital Accumulation”; all of which remain relevant today. One that seems so important today is “Free Markets and Competition” and the disastrous idea of tariffs that are being promoted by the pending Trump administration.

Smith notes natural resources are not equally distributed in the world. Some countries have more raw material than others, more available labor at a lower cost, and can produce product at lower prices. With free trade, all citizens of the world are benefited by lower costs of goods. With tariffs, product costs are artificially increased when they could reflect actual costs of production. Of course, the producer can increase costs, but the market will find an alternative if the costs become too high.

David Ricardo (1772-1823)

Ricardo’s theory of competitive advantage suggests some countries can produce product at less cost than others. This reinforces the critical importance of free trade. Free trade flies in the face of both the Biden’s passing administration and Trump’s future administration; both of which believe tariffs protect jobs in America. They don’t; because tariffs artificially increase product costs while protecting labor inefficiency that increases consumer prices. Tariffs are a lose-lose proposition. It may affect jobs in the short term but there are many jobs that can be created by government and private companies in human and public service industries. Those investments would offset inefficient product production and ensure future jobs.

John Maynard Keynes (1883-1946)

Leigh notes that Keynes was bisexual and a pivotal figure in modern economics. He believed in the theory of Aggregate Demand meaning that “…spending in an economy is the primary driver of economic growth.” He advocated government intervention when demand was low, and that government should increase spending and cut taxes to increase demand when a recession or depression threatens the health and welfare of the public. Interestingly, Trump believes in reducing taxes but objects to government spending that improves employment. The effect of reducing taxes only increases income inequality and does little for employment because the rich are wary of investing in a weakening economy.

Milton Friedman (1912-2006)

Both Keynes and Friedman believe in government intervention, but Friedman exclusively believes in using only monetarism as a tool. Keynes agrees but had the added dimension of government spending that creates jobs. In contrast, Friedman argues there is a natural rate of unemployment and when government intervenes it creates inflation. He strongly agreed with free markets which suggests he would be against tariffs but at the expense of higher unemployment. The cloying part of that argument is it increases income inequality by making the rich richer, the unemployed and middle-class worker poorer.

Leigh’s book is a brief review of western economics. It glosses over much of the science, but it is highly entertaining and worth listening to more than once. Additionally, Andrew Leigh’s brief history of economics reminds listeners of a threat America faces in the next four years.

VENGEFUL IDEALIST

The election results are in, and Trump is our President once again. This is a sad commentary on the will of the American people and the threat America is to world economic comity.

Books of Interest
Website: chetyarbrough.blog

People, Power, and Profits (Progressive Capitalism for an Age of Discontent)

By: Joseph E. Stiglitz

Narrated By: Sean Runnette

Joseph Stiglitz (Author, American economist, public policy analyst, received a Nobel Memorial Prize in Economic Sciences in 2001.)

With reservation, Joseph Stiglitz’s book “People, Power, and Profits” is reviewed here. The reservation is because of the risk of succumbing to echo-chamber’ belief. That belief is that corporations and wealthy individuals should not be able to pour as much money as they want into the American election process, that bankers unjustly escaped punishment for the 2008 financial crises, and that Donald Trump should never again be elected President of the United States.

Stiglitz is considered a “New Keynesian” economist which puts him at odds with famous economists like Milton Friedman and Friedrich Hayek. Friedman believes the most effective fiscal policies comes from monetary policy control by the government. Hayek believed in a market economy with as little government intervention as possible. Stiglitz flatly disagrees with Hayek and only agrees with Friedman in that government has a responsibility to intervene in government economic policy. Stiglitz identity as a “New” Keynesian is because, unlike Keynes’ economic theory, there is no waiting for an economic crisis for government to intervene but to intervene now to make future economic crises less likely.

John Maynard Keynes (English, Eton and King’s College graduate, mathematician, economist, 1883-1946, died at age 62.)

Why I am concerned about listening to Stiglitz’s book about the economy is that I am listening to some things I already believe. I believe the gap between rich, and poor is the greatest threat to, not only American democracy, but all forms of government. Stiglitz may be my echo chamber.

Stiglitz believes in democratic government intervention to ameliorate the wide gap between rich and poor.

Stiglitz has an idealist platform to cure what he views as the solution to narrowing the gap between rich and poor in America. Stiglitz makes five policy recommendations to reduce the gap between rich and poor in America.

Increase taxes on income from capital gains and inheritance.
Use tax revenues to improve public education in ways that equalize costs between the rich and poor.
Refine anti-trust laws to prevent monopolies and promote competition.
Intervene in corporate governance to ensure fairer compensation between management and labor.
Regulate banks to prevent exploitation of the public.

These are defensible polices but they have to survive the give and take political process of American democratic government.

However, that process is unfairly biased by allowing corporations and the wealthy to pour disproportionate amounts of money into the American election process. Contribution by corporations and the wealthy should be limited because candidates are beholding to big financial donors with little concern for the poor.

Small donors driving 2020 presidential race

In the 2020 and 2024 election cycle, big donors contributed from 75 to 78 percent of campaign donations.

The problem with Stiglitz’s book is not in his recommendations but in his vengeful angel’ rhetoric. America is founded on freedom, not revenge. It is the give and take of differences of opinion and “checks and balances” of the Constitution that have made America great. Many mistakes have been made and are still being made by our government but even a horrible President like Trump cannot change the fundamental direction of our democracy.

John F. Kennedy’s belief that a rising tide lifts all boats has not provided life vests to the poor in America.

The gap between rich and poor in America must be resolved. Neither Harris nor Stiglitz may be the answer, but Trump is only going to try to resurrect a past that has led our government in the wrong direction. The unconscionable cost of medical services and drugs, extraordinary compensation for executives, regressive taxes, election financing bias, and financial industry greed must be addressed through the American political process.

American democracy’s failures will not be cured, but they must be addressed and ameliorated to remain a beacon for freedom in the world. The election results are in, and Trump is our President once again. This is a sad commentary on the will of the American people and the threat America is to world economic comity.

POLITICAL CHAOS

Tariffs to restrict foreign production is shooting citizens in the foot by artificially increasing the cost of living.

Books of Interest
Website: chetyarbrough.blog

Edge of Chaos: Why Democracy Is Failing to Deliver Economic Growth – and How to Fix It

By: Dambisa Moyo

Narrated By: Pamala Tyson

Dambisa Moyo (Zambian-born economist and author with a BS and MBA from Harvard, former World Bank consultant to Europe, Central Asia and Africa.)

“Edge of Chaos” is a revelatory and intelligent analysis of economic rewards and risks of democracies and dictatorships. Fundamentally, Moyo argues failures of government economies are related to societal instability and short-term government economic policies that are disproportionately influenced by monied interests and kleptocratic political leaders. Rich corporations and kleptocratic leaders distort economic opportunity, create chaos while producing and exacerbating economic inequality. She argues America is at the edge of chaos because of a flawed democratic election system that is biased toward short-term rather than long term economic policy.

Moyo identifies the Gini index of income inequality to show that there is little difference between the rich and poor in China and the United States despite their government leaders’ differences.

China is a dictatorship while America is a form of democracy. They are nearly the same on the Gini index scale of citizen inequality while South Africa, Zambia and Brazil are at the bottom. Slovenia, the Czech Republic, Slovakia, Belarus and most of the Scandinavian countries show the lowest differences in citizen’ economic inequality. Mayo argues the difference has little to do with their forms of government except in relation to their government policies. In her opinion, China and the United States could improve their citizen’s Gini index position if their government policies would focus on income equality.

Both China and America have relative stability but with different forms of government.

Unquestionably, freedom is the sine non quo (indispensable ingredient) of America, but it is income inequality that causes the chaos Moyo alludes to in her book. That chaos is not overtly apparent in China because of dictatorship but one who has traveled to China feels there is a similar level of discontent, if not chaos, among its citizens over economic inequality.

Moyo’s solution for reducing America’s growing chaos seems difficult but not impossible to implement.

Dambisa Moyo’s solution revolves around the following 8 recommendations.

Make voting compulsory to increase voter participation more representative of the people.
Make election to the House of Representatives a six-year term like the Senate to encourage longer term economic goals but limit the number of terms one can be in office. (Eliminate career politicians.)
Increase the pay of politicians to what successful private sector leaders receive.
Establish policy making agencies that can focus on long-term policies without being threatened by near term election cycles.
Invest in the education of future leaders of the political system.
Encourage public officials to focus on economic diversification with an educated understanding of technological change in the world.
The wealth of the nation should be focused on reduction of economic inequality.
Strategies to manage natural resources should be developed to focus on sustainability.

Fair trade is where America is on the wrong side of history according to the author.

Adam Smith believed in fair trade.

Adam Smith argued for removing trade barriers like tariffs and quotas because of limited natural resources. He explains resources are more efficiently allocated, product production is increased, and economic growth is improved with free trade. As inferred by Moyo, American chaos is partly a result of ignoring Adam Smith’s prescient understanding of economics.

America democracy has journeyed a long way since 1776.

America’s fundamental success came from its emphasis on freedom within rules-of-law organized around the “checks and balances” of three distinct branches of government, i.e., the executive, congressional, and judicial branches. This is the strength of American Democracy that has offered stability. The inference made in “Edge of Chaos” is that America’s stability is at risk if it does not adapt to technological change wrought by A.I. and global interconnectivity.

Service is a growth industry in America.

Technology is changing the nature of American productivity from material products to service. With the help of A.I., America can begin to address many of the service needs of its citizens. From aid to the homeless, to education for service to others, to drug treatment of the addicted, to improved health care for all, the prosperity and income of Americans can be more equitably shared.

Global interconnectivity requires greater acceptance of fair trade as originally described by Adam Smith.

Today’s alleged protection of worker employment by using tariffs to restrict foreign production is shooting citizens in the foot by artificially increasing the cost of living. Re-education for service to the public by using A.I. to make citizens more human-centered offers an alternative to 21st century American chaos.

These are intelligent observations by a very young and well-educated author.

A.I.s’ CROSSROAD

The greatest threat of A.I. is that the ubiquity of information will turn people and countries against each other.

Books of Interest
Website: chetyarbrough.blog

Feeding the Machine (The Hidden Human Labor Powering A.I.)

By: Mark Graham, Callum Cant, James Muldoon

Narrated By: Orlando Wells

Graham, Cant, and Muldoon have backgrounds that offer an educated opinion about the impact of artificial intelligence on the world labor market. Graham is a Professor of Internet Geography affiliated with the University of Oxford’s School of Geography and the Environment. Cant is a researcher and labor rights advocate for workers in the gig economy. Muldoon is an Associate Professor in Mangement and Head of Digital Research at a think tank on modern technologies.

“Feeding the Machine” reminds one of the Industrial Revolution in its early stages.

The fear of loss of jobs because of machine replacement led to the Luddite movement that destroyed machines manufacturing products. The quality of machine-produced product may not have met craftsman standards, but production cost was so much less, the public preferred the lower-cost product. As the industrial revolution grew, the quality of production improved, and many craftsmen lost their jobs. Many of these craftsmen had to find new jobs. Some became users of machines to produce product. The transition was undoubtedly difficult because it required changes in the way people work. Rather than working for themselves, they had to work for manufacturers that produced products with machines. Craftsman had to work regular hours for a wage rather than sell product based on their exclusive labor. Karl Marx in “Das Kapital” explained that capitalism devalued worker’s contribution to society because they were not compensated fairly for their work based on profits earned by company’ owners.

Workers began to unionize to increase their political power and influence on managers of companies owned by entrepreneurs.

The results of unionization have been to begin equalizing wages and company profits. That equalization is a battle between corporate profit needed to stay in business, reasonable return to company owners, and livable wages for workers. When any of these three are out of balance, companies either go bankrupt, or find an acceptable balance that serves the needs of all.

Information is energy in today’s A.I. world., just as steam was in the industrial revolution.

As one listens to “Feeding the Machine” which claims A.I. produces poor quality energy is like early steam engines that provided inadequate energy. Who can say that A.I. “energy” will not improve just as steam engines improved? One becomes skeptical about the authenticity of the authors’ opinion. It seems too soon to believe A.I. power will not improve human life, just as steam engine power improved product quality and lowered consumer prices.

The authors make valid points about the impact of A.I. on workers.

Workers are often paid a pittance for repetitive work that is mind numbing because of the need to monitor digital information for its accuracy and quality. Is that significantly different than the repetitive motions needed by workers on a production line for manufactured goods? Henry Ford changed the way cars are produced by creating assembly line work that gave repetitive jobs to workers. Is that repetitive work much different than digital inspection by workers of A.I. production?

The many examples the authors give of remote workers’ wages for digital accuracy in Africa and other poverty-stricken areas of the world is heart rending. These new laborers are paid small wages that assure continued poverty. Economic inequality is a crime against humanity. Improving education seems the only sure way of defeating economic inequality. Education is a long road to travel but there seems no solution for economic insecurity without it.

Having traveled to Africa, seeing firsthand a dedicated teacher in a class of school children, one feels there is hope that the world’s economic insecurity will end.

Ford was a conservative right-wing businessperson by any measure. He supported Hitler because he was an authoritarian that resurrected a faltering German economy. However, Ford recognized workers were consumers and despite low wages for automobile workers of his time, he chose to raise wages. Ford recognized workers were also consumers. That remains true today. It seems reasonable to presume, unlivable wages will rise for digital workers around the world for the same reason the conservative Ford raised his worker’s wages.

This is not to say, what the author’s write is wrong about workers in Africa that are exhausted from repetitive work at an A.I. company but that the world is at a crossroad similar to the industrial revolution.

The world will change based on the weight of people’s discontent. The greatest threat of A.I. is that information ubiquity will turn people and countries against each other. The result may be a nuclear holocaust that changes the world and societies in a way that is impossible to predict.

The war in Ukraine.

The authors go on to explains how A.I. dehumanizes society. Creating a world-wide’ assembly line for product production allows companies to reduce their production costs by hiring workers around the world who are eager to have an income to improve their lives. The consequences to companies in the host country are improved profits. The consequence to host countries’ workers are layoffs and loss of income. A country of wealth has tools to mitigate worker layoffs, poorer countries do not. Laid off workers have better chances of finding new jobs in wealthy countries. This is not to minimize the consequence but to suggest the world is benefited more than harmed by A.I.

A point made by the authors that played out in the actor strike in America is that actors should be compensated for any work generated by A.I. images or voices of actors.

A.I. that generates false images should be penalized for misrepresenting real people without their consent. Another caution suggested by the authors is that A.I. can recreate art that is equivalent to todays and past literary and visual artists. That seems somewhat hyperbolic but if it is true, society has the tools to penalize those who choose to use A.I. to deceive the public. A.I. is only a tool of society. It is a source of energy that can destroy but also improve the lives of humanity. The authors note only minds are truly creative. A.I. is a recreator of the past, not the future. The use of A.I. by humans improves creative potential.

IN THE LAST CHAPTERS OF “FEEDING THE MACHINE”, THE AUTHORS SOUND AN ALARM BY NOTING THE CONTROL EXCERCISED BY INTERNET MOGULS WHO DIRECT THEIR EMPLOYEES TO CODE ALGORITHMS TO MEET THE NEEDS OF THEIR COMPANIES. THIS IS A SMILAR POWER EXERCISED BY ROBBER BARONS OF THE LATE 19TH CENTURY. DEMOCRACRATIC CAPITALISM COPED WITH ROBBER BARON’S HEGEMONIC POWER THROUGH GOVERNMENT HEARINGS AND OVERSIGHT. ELECTED OFFICIALS SEEM WILLING TO COPE WITH MEDIA BARONS OF THIS CENTURY IN THE SAME WAY. PUBLIC HEARINGS AND GOVERNMENT OVERSIGHT OF MEDIA MOGULS ARE BEING CONDUCTED TODAY.

PRECISION

The human factor is at the heart of perfection with precision as the qualifying characteristic of craftsmanship or technology.

Books of Interest
Website: chetyarbrough.blog

“The Perfectionists” How Precision Engineers Created the Modern World

By: Simon Winchester

Narrated by: Simon Winchester

Simon Winchester (British-American author, journalist, historian.)

Simon Winchester has a remarkable ability to simplify, detail, and vivify history’s complexity. Winchester is not new to this listener. His erudition, writing, and narration are a pleasure to read or hear. His story of the origin of the first Oxford English Dictionary, is a fascinating recollection of Dr. William Minor who shot and killed a stranger on a London street. Dr. Minor was imprisoned in an asylum for his aberrant behavior but became an important source of information for James Murray, the leading lexicographer of the “Oxford English Dictionary”.

“The Perfectionists” is about the advance of the world economy from the perspective of entrepreneurs driven to succeed. Their success, in Winchester’s opinion, is based on understanding and capitalizing on the value of precision.

James Watt (1736-1773) perfected Thomas Newcomen’s 1712 steam engine

Though one may go back to the first century to find the first steam engine, it is the invention of James Watt, and the improvements of Matthew Boulton, and Sir Charles Algernon Parsons in the 18th and later 19th centuries that perfected steam engine utility and power. Watt created the steam engine, Boulton helped Watt perfect the steam engine for industrial use, and Parsons expanded its utility by creating steam turbines to power the propellers of steamboats. Each played a role in making steam engines more efficient with precise design and milling refinements that provided more power and wider utility.

Luddites protested against the industrial revolution because machines were replacing jobs formerly done by laborers. Just as the Luddites fomented arguments against mechanization, Nicholas Carr argues automation created unemployment and diminished craftsmanship.

With the advent of the industrial revolution, Winchester explains how speed and quality of production were geometrically improved by focusing on precision. He offers several industry examples, including weapon manufacture, automobile production, camera refinement, telescope resolution, airplane manufacture, watch making, and CPU design which now leads to the A.I. revolution.

**Winchester notes the beginning of the industrial revolution starts with the perfection of energy production machines that power the manufacture of standardized parts for finished products.**

Winchester tells the story of the French that insisted on standardizing parts for gun manufacture to increase the speed with which repairs could be made for damaged weapons. Winchester recounts the war of 1812 when Great Britain bloodied the nose of America by routing the capitol’s volunteer defense because of a lack of useable guns. He tells the story of an American rifleman with a broken trigger on his rifle who chooses to run from a British onslaught because trigger replacement would take two weeks for customization to fit his gun.

American guns were custom made which meant that when one was damaged it would take weeks for repair.

Honoré LeBlanc, a French gunsmith during the reigns of Louis XV and XVI, created the idea of interchangeable gun parts in the 18th century. Though it came to the attention of Thomas Jefferson, it did not catch hold in America until after the war of 1812. There was an effort by America to standardize parts in the early 1800s but Eli Whitney (the inventor of the cotton gin), hoodwinked the American government into a contract for standard gun parts that never materialized.

**Winchester explains Eli Whitney flimflammed the American government to get a contract for standardized gun parts but never produced the product for which the government contracted.**

Winchester notes Whitney knew nothing about guns and hired a crew of customizing gunsmiths who manufactured unique weapons that could not be repaired with standardized parts. Because the parts were manufactured by individual craftsman, the guns produced were not interchangeable. They did not have precisely manufactured parts that would allow interchangeability. Whitney gave a demonstration to the government with only one gun that he assembled in front of Jefferson and a government committee. He did not demonstrate any repair with standard parts. Jefferson fell for the false presentation and initially lauded Whitney. This demonstration was in 1801 which explains why a soldier might have fled because of a broken trigger in the War of 1812.

Henry Royce (1863-1933)

Winchester explains standardizing and precision making of gun parts were an essential step in the industrialization of America. Standardization and precision-made interchangeable parts became the touchstone of success in the automobile industry in the 20th century. Winchester tells the story of Rolls Royce and Ford Motor companies to make his point. Both Royce and Ford recognized the importance of precisely made standard automobile parts to garner their success in the automobile business. Though their route to success is precise manufacture of automobile parts, the wealth they created for themselves was quite different.

Henry Ford (1863-1947)

Ford became one of the richest people in the world while Royce became wealthy but not among the richest in the world. Royce chose to pursue perfection of every part of the automobile which limited his unit production and increased manufacturing cost. Though Ford perfected standardized mechanical parts, they were precisely designed only for functionality. Ford added the dimension of standardized labor to the manufacturing process. By creating an assembly line of laborers with precise replaceable mechanical parts, Ford could produce more automobiles than Royce in a shorter period of time.

The point Winchester makes is perfection of standardization (production of precisely tooled engine parts) is a cornerstone of successful industrialization. Royce expanded the concept to every part of an automobile while Ford focused on replaceable mechanical parts of the automobile.

Winchester tells a story of ball bearing manufacturing during Henry Ford’s reign when some automobiles were failing. The bearing manufacturer proved it was not their bearings with tests that showed the bearings were perfectly within precise measurement requirements. What Ford realizes is that the ball bearings were milled exactly the same and met the precise dimensions required. The problem was found to be the assembly line and human assembly mistakes. One thinks of the loss of precision in Boeing aircraft today and wonders what that means for Boeing’s future if it is not immediately corrected.

Winchester contextualizes the story of the ball bearings in recalling the history of a near catastrophic plane crash when a Rolls-Royce jet engine fails on a Qantas Airlines Airbus A380 in 2010.

Jet engines are precisely manufactured marvels of aviation. However, a tiny flaw in one oil pipe within the engine nearly caused the loss of over 400 passengers. Winchester explains Jet engines are dependent on superheated gas exchange that, if not properly cooled, will damage the engine. Every engine has a series of drilled holes that allow ambient air to cool the engine during flight. The holes are drilled in precise locations throughout the engine louvers and oil pipes to keep the engine from overheating. One of the oil pipes holes is in the wrong location which caused the engine to overheat after many flights. The failure of human oversight of the automated process and final checks by the manufacturer are the underlying cause of the near catastrophe.

More examples of the importance of precision are wonderfully offered by Winchester in “The Perfectionists”. His examination of the tech industry is as prescient as his analysis of the automotive industry and airline industry. He covers Moore’s law and how technology is advancing at an accelerating pace while inferring humanity may be at a turning point. That turning point is the crossroad between human and machine decisions about the future.

The human factor is at the heart of perfection with precision as the qualifying characteristic of craftsmanship or technology.

Winchester infers craftsmanship does not mean precision is to be sacrificed. He recalls the emphasis on precision in Japanese culture where many craftsmen assembled and repaired Seiko watches to revitalize the brand in the late 20th century. Precision is not a lost art whether work is done by machine or a craftsman, but the human factor remains a critical component of both processes. The point to this listener is that precision is only a part of what has advanced the welfare of society.

WHAT’S TO BE DONE

America cannot pass essential legislation that fairly addresses the burden and potential benefit of immigration.

Books of Interest
Website: chetyarbrough.blog

“A Map of Future Ruins” (On Borders and Belonging)

By: Lauren Markham

Narrated by: Gilli Messer

Lauren Markham (Author, reporter on issues about migration and human rights.)

Immigration is a hot subject around the world.

Lauren Markham writes a somewhat disjointed book about immigration to a Greek island between Turkey and Greece.

Lauren Markham offers a report of a fire in a Lesbos refugee camp in the small town of Moria on September 9, 2010. There were no deaths from the fire but the conditions of the encampment and the government’s response to the crises tell of unfair and inadequate treatment of refugees–reminiscent of other countries dealings with unwanted immigrants.

The camp was designed to hold 3,000 people but grew to nearly 13,000. Seventy percent of the migrants were from Afghanistan. A fire of unknown origin destroyed the immigrant’s shelter that gave notice to the world of the inadequate care offered refugees fleeing crime, poverty, and displacement in their home countries.

Turkey and Greece have a storied history of conflict that is reminiscent of the Afghanis flight from Afghanistan. Turkey’s most revered leader, Mustafa Kemal Ataturk, ordered Greeks to leave Turkey in a mass exodus during his reign. Ethnic and religious differences between the Ottoman Empire and Greece came to a boil in 1923. Those differences are reminiscent of the escape of Afghanis from the restrictive life of the Taliban in Afghanistan. Afghanis chose a route from Afghanistan through Iran to Turkey to the Greek Island of Lesbos to escape the Taliban.

Markham shows the initial response of the Greeks was to aid the Afghanis in their flight but as the number of refugees grew, the burden became too great. The conditions of the encampment deteriorated, and the anger of the Greek government escalated. A fire of unknown origin began in the camp. Six Afghanis, two of which were minors under 18 years of age, were arrested and found guilty of setting the fire. Markham shows the evidence for conviction had nothing to do with truth but was manufactured by the Greek Court to find a verdict of guilt.

“Dallas, Texas, United States – May 1, 2010 a large group of demonstrators carry banners and wave flags during a pro-immigration march on May Day.”

The inference from Markam’s report is that America’s border state conflicts will, and undoubtedly have, resulted in unjust treatment of emigrants. The irony is that America needs emigrants to meet the needs of its economic future. America seems to be doing as poor a job of addressing immigration as the story of the Afghanis in Moria. America cannot pass essential legislation that fairly addresses the burden and potential benefit of immigration.

THE MARSHALL PLAN

NATO is not an American Marshall Plan but a bulwark for nation-state self-determination.

Books of Interest
Website: chetyarbrough.blog

“The Marshall Plan” (Dawn of the Cold War)

By: Benn Steil

Narrated by: Arthur Morey

Benn Steil (Author, American economist, senior fellow and director of international economics at the Council on Foreign Relations.)

Along with an excellent history of America’s “…Marshall Plan”, there is an underlying message about two fundamental forms of government, i.e., one is democratic, and the other is authoritarian. By democratic, the point is not to suggest an idyllic understanding of American Democracy or Russian Authoritarianism. America and Russia have experienced government leadership that has been both authoritarian and democratic in the last 248 years.

One can justifiably argue America’s authoritarianism was experienced during the four years of the Trump administration (2017-2021).

In contrast Russia’s democratic experience was with Mikhail Gorbachev between 1985 and 1991. Before and after Gorbachev, democratic experience in Russia has been limited and largely authoritarian. What history of “The Marshall Plan” shows is the superior value of American democracy’s checks and balances that limit the power of authoritarian leadership by preserving deliberations of the many as opposed to the one. Trump is not the first U.S. President that was an authoritarian.

George Catlett Marshall Jr. (1880-1959, American army officer and statesman, became Secretary of State and Secretary of Defense during the Truman administration.)

History of “The Marshall Plan” shows the resilience of democratic versus authoritarian governance. Steil shows “The Marshall Plan” is created in a boiling cauldron of disagreement among branches of the American government. The conflicts between American political parties and departments of government hammered out a plan that improved the economies of both America and Europe after the war. America became the economic hegemon of the world as Russia’s economy collapsed in the early 60s.

MAO ZEDONG (1893-1976, FOUNDING FATHER OF PEOPLE’S REPUBLIC OF CHINA)

One might argue the success of China came as a result of the more inclusive economic decision-making policies of Deng Xiaoping after Mao Zedong’s death. With Deng’s opening the economy to market-oriented reforms in 1978, worker efficiency and productivity created an economic boom in China. China’s danger today is the autocratic rule of Xi Jinping. His one-man rule nearly collapsed the economy during Covid 19. America certainly suffered from Covid, but Trump’s authoritarian character was mitigated by political resistance to unilateral Presidential decision-making.

Steil explains how Molotov delayed negotiations on “The Marshall Plan” with a clear understanding that only one person, Joseph Stalin, made decisions in Russia.

Steil notes “The Marshall Plan” is singularly disparaged and reviled by the Russian government. That disparagement is directed by one person, Joseph Stalin. There is no one to oppose the autocratic rule of Stalin’s leadership. Stalin’s opposition was either sent to the Gulag or murdered. A more balanced power structure in Russia could have taken advantage of “The Marshall Plan” but by singular fiat of one person (Stalin) implementation was impeded after WWII. The errors inherent in communism and authoritarian rule are being recreated by Putin in the 21st century.

What Steil shows is that many elected officials in America fought the principles of “The Marshall Plan”. However, the constant back and forth of government policy arguments in Congress aided European recovery after the war in a way that stabilized Europe and monumentally improved the economic growth of America.

Autocracies can certainly improve their economic growth at a pace that is superior to governments ruled by democratic ideals. However, autocracies have a much greater risk of following the wrong path because of their singular focus on one person’s decisions.

With an autocrat’s decision-making process, economic growth is either stultified or accelerated by one person’s decision. The give and take of democracies offer the benefit of different policy maker’s perspectives that may slow policy decisions but ultimately improve the odds of forward economic growth.

**This argument is somewhat disingenuous in the sense that American natural resources were** still to be tapped in the 20th century.

However, it is more than the availability of natural resources that made America economically successful. It is the give and take of a democratic process that protects America from the giant missteps that can come from autocratic rule. America has had some good to great rulers, but it has also had some ignorant, bigoted autocrats that offered minimal support for the ideals of freedom and equality. Checks and balances are the strength of American democracy. Presidents can make a difference, but they cannot destroy America’s future.

Ben Steil’s history of “The Marshall Plan” is not limited to an explanation of how important and difficult it is for America to pass important and consequential legislation.

The last chapters of Steil’s history of the Marshall Plan explains why Russia, China, and North Korea resent American encroachment on their spheres of influence. From the era of Stalin, Mao, and Kim Jong II, there has been a growing concern over the expansion of America’s sphere of influence. Steil explains how the Marshall Plan has morphed into a deepening concern about NATO expansion in Europe. As noted in an earlier, the Marshall Plan is created to aid recovery of countries that were impacted by WWII’s destruction. In reality it aided America to become the hegemon of the world. Because of the economic stimulus that revived the countries damaged by WWII, America created new markets for their industrial growth and international trade.

NATO is viewed as another vehicle for America’s economic growth and ideological threat to Putin, Xi, and Kim Jong Un’s control of their countries.

NATO is viewed as another invidious way for America to expand their influence and power. That seems an unfair evaluation of NATO. NATO is a military defense plan saying one country within NATO that is attacked by another country is an attack on all NATO countries. Every nation that has managed to become an independent country should be able to pursue there own interests.

The iron curtain is rusting but its characteristic strength remains a barrier to international cooperation.

The rusting of the iron curtain comes from the tears of societies ruled by authoritarians. The authoritarians are leaders who believe their way of life is threatened. NATO is viewed as a trojan horse at the front gates of non-aligned countries.

One decries Putin’s slaughter of Ukrainians in an unjust war. Life of innocents have no value to today’s Russian leadership that believes their power and way of life is threatened.

The real-politic of authoritarian’s desire for stability and power outweigh the value of human life. The same is seen in the plight of Palestinians who are not part of the October 7th’ terrorists’ killings and kidnappings but are in the way of Israel’s retaliation against Hamas.

In my amateur opinion, China, Russia, North Korean, or other authoritarian governments have a right to rule their countries as they wish. Their citizens are the key to every leader’s longevity. NATO is an effort to offer freedom of choice to established independent countries but if the citizens of a country support their leaders, there is little NATO, or any alliance can do, except to support the sovereignty of all nations.

NATO is not an American Marshall Plan but a bulwark for nation-state self-determination.

Steil argues George Kennan is right in suggesting NATO expansion would be “the most fateful error of American policy in the entire post-Cold War era”. Kennan believed it would inflame nationalist beliefs and reinvigorate the Cold War. And so, it has–as evidenced by Russia’s invasion of Ukraine, China’s expressed intention and action toward Taiwan, and North Korea’s armaments support of Russia.

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